Weekly Rock Pulse – Markets Steady as Investors Await Fed’s Next Move
The second week of September closed with a sense of anticipation across global and local markets. Investors balanced optimism with caution as U.S. inflation data, corporate earnings surprises, and local equity movements set the stage for what promises to be a pivotal week ahead.
The Global Picture: All Eyes on the Fed
Markets worldwide were buoyed by fresh U.S. inflation data, which came in at 2.9% year-on-year for August. While this is still above the Fed’s 2% target, the stability reassured investors that the central bank might finally loosen its grip on monetary policy. With the labour market showing cracks—only 23,000 new jobs were added last month against an expected 75,000—the Fed is now widely expected to announce a rate cut. The probability? Practically a done deal at 100%.
That expectation pushed major indices higher: the NASDAQ jumped 2%, the Dow added 1%, and Japan’s Nikkei surged 4.1% after its Prime Minister’s resignation fuelled bets on fresh pro-growth policies. Even Oracle managed to steal the spotlight, announcing an eye-watering $455 billion in unrecognized revenues—a figure that made traders scramble for the stock.
In the bond market, the U.S. saw yields ease as rate-cut bets intensified, while Europe’s bonds held steady after the ECB decided not to rock the boat.
Nairobi Securities Exchange: Bulls Hold, But Turnover Slips
Back home, the Nairobi Securities Exchange (NSE) held its ground. The NASI ticked up 0.2%, and the NSE-20 Index gained 1.7%, reflecting a generally bullish sentiment. Market capitalization inched higher to KES 2.82 trillion.
But beneath that stability lay a quieter story—trading activity cooled significantly. Turnover sank 43.9% to KES 4 billion, with domestic investors driving more than 80% of trades. Foreign investors, who had been dominant earlier in the year, pulled back sharply.
Among individual stocks, it was a week of extremes. Flame Tree Group soared nearly 30%, while Sameer Africa shed over 15%. The biggest headline, however, belonged to Standard Chartered Bank Kenya. A Supreme Court ruling on its pension dispute potentially leaves it liable for a KES 7 billion settlement—a heavy blow for a bank already under pressure after posting a 21% profit decline in the first half of the year. Dividend prospects? Investors might want to temper expectations.
Sector Winners and Losers
One sector’s pain was another’s gain. The Automobile & Accessories sector emerged as the star performer, driven by Car & General’s double-digit rally. On the flip side, telecommunications stocks slid as foreign investors cashed out after recent highs.
Looking ahead, the banking sector could face headwinds. With several lenders approaching interim dividend book closures, profit-taking is expected to weigh on prices.
Fixed Income: Investors Chase Longer Tenors
The fixed income market painted a picture of cautious positioning. Investors piled into the 364-day T-bill, bidding KES 20 billion as they sought to lock in higher rates. Shorter-tenor securities saw lighter demand, pulling yields slightly lower across the curve.
Secondary bond trading cooled off too, falling 18.9% to KES 39.36 billion. Meanwhile, Eurobond yields softened, shedding about 50 basis points on average, as global investors bet on a dovish Fed.
Macro Update: Fuel Prices Ease, But Don’t Get Too Comfortable
Kenyan households and businesses caught a small break this month as fuel prices inched down. Super petrol dropped to KES 184.52, diesel to KES 171.47, and kerosene to KES 154.78.
But the relief is bittersweet. The decline was largely offset by the government scrapping subsidies—diesel’s was fully removed, while kerosene’s was nearly halved. With global oil hovering around $70 per barrel and Middle East tensions flaring, the risk of price escalation is still on the horizon.
On the Radar: What’s Next?
The spotlight is firmly on next week’s U.S. Federal Reserve meeting. A widely expected 25bps rate cut could provide fresh momentum for equity markets. Anything less—or nothing at all—could flip optimism into disappointment.
Locally, investors will keep an eye on corporate actions, including upcoming dividend payments from giants like EABL, KCB Group, ABSA Bank, and Standard Chartered.
Final Take
This week felt like the calm before the storm. Markets are holding their breath for the Fed’s move, local equities are steady but thinning in activity, and fuel prices gave Kenyans a short-lived sigh of relief. If there’s one word that sums it up, it’s anticipation—and by this time next week, we’ll know if that anticipation turns into celebration or caution.
